April 12, 2012

DOJ sues publishers, and John Sargent leads the resistance — again


Macmillan head John Sargent

The other shoe has dropped: As expected but still stupefying nonetheless, the Department of Justice yesterday, in an announcement made by Attorney General Eric Holder no less, said that it is indeed suing Apple and five of the Big Six publishers — HarperCollins, Hachette, Simon & Schuster, Penguin and Macmillan — for collusion on ebook price-fixing. Simultaneously, it also announced that three of those publishers — HarperCollins, Hachette and Simon & Schuster — had settled. Meanwhile, Penguin and Macmillan, along with Apple, announced they would fight the charges.

Also simultaneously, the very thing publishers predicted would happen — the very thing this was all about preventing — did in fact happen: immediately, as if to twist the knife, Amazon announced it was dropping its prices on ebooks.

“Amazon must be unbelievably happy today,” one analyst tells David Streitfeld in a New York Times story. “Had they been puppeteering this whole play, it could not have worked out better for them.” Meanwhile, Streitfeld reports,

Booksellers reacted to the news with dismay. The American Booksellers Association said the Justice Department’s decision “to challenge a business model that played an essential role in fostering a more competitive, diverse retail environment seems to turn logic on its head.”

Others, of course, were celebrating — such as Steve Berman, an attorney leading a class-action lawsuit against the same five publishers and Apple for the same price-fixing charges. “The actions by the Justice Department substantiate our view of the case,” Berman tells Streitfeld … who reports that Berman’s firm “is in a Seattle office building that also houses Amazon offices.”

Meanwhile, the Justice Department’s lawsuit itself is a doozy, with elements of what appears to be surveillance of the top executives of the publishing companies. As Julie Bosman details in another Times story, the lawsuit says …

… the chief executives of the publishing companies met once every several months to “discuss confidential business and competitive matters, including Amazon’s e-book retailing practices.”

One of the meetings took place in the Chef’s Wine Cellar, a private room at Picholine, a Manhattan restaurant. One of the chief executives “reported that business matters were discussed,” the suit said.

“These private meetings,” the suit says, “provided the publisher defendants’ C.E.O.’s the opportunity to discuss how they collectively could solve ‘the $9.99 problem’ ” — that is, Amazon’s practice of charging $9.99 for most newer and best-selling e-books.

A Financial Times report adds to this, saying it was Penguin head John Makinson and Macmillan head John Sargent meeting in the Wine Cellar.

But Sargent, who inspired the industry with his stand against Amazon two years ago — detailed in this letter to his authors and staff, it was what led other publishers to also stand up against Amazon, which is the basis of the current case — denied the charges in another stirring statement to authors and employees, reprinted by Publishers Weekly. He says he made the decision “on January 22nd, 2010, a little after 4 a.m., on an exercise bike in my basement,” and that it was actually “the loneliest decision I have ever made, and I see no reason to go back on it now.”


Dennis Johnson is the founder of MobyLives, and the co-founder and co-publisher of Melville House. Follow him on Twitter at @mobylives